COUNCIL March 5 Discussion on Benefits Redesign

After the standing reports of officers at the University Council March 5, the major item for dis
cussion was the proposed redesign of benefits
(Almanac Supplement February 11). A report by the Council's Personnel Benefits Committee was the focal point, and its written portion appeared in last week's issue. The following exchanges, edited by Almanac staff from a tape transcription, give the context of the PBC's report, and some the responses that came after it.--Ed.

Dr. Larry Gross (serving as moderator in the absence of Dr. David Hildebrand): If you recall, the Personnel Benefits Committee said that they
would be prepared to make comments or initiate a discussion. I should also note that I have two requests to speak from people who are not members of Council, and I've told them that I would hope to be able to have them speak once members of Council had a chance to speak. We'll begin with the Personal Benefits Committee, Professor Hackney.

Dr. David Hackney: The Personnel Benefits Committee, to be exact, said that they would follow the instructions of University Council and report. I'm not sure the Committee feels ready to report. We've met four times since we got the draft four days before it was published in Almanac. We've carried on extensive deliberations by e-mail, as those who were on the receiving end of that can attest. The time for review of the proposals is very
short and many members of the committee were concerned that, had there been more time, they might have had different opinions on some of the recommendations they're going to give you, or more specific suggestions for changes. But ultimately we voted on a series of propositions related to the benefits redesign report, and there were no unanimous votes on any of these....

[Dr. Hackney then presented the 20 propositions that appeared in Almanac last week, citing in each case the percentage of the PBC voting yes/no. He then continued informal discussion.]

Dr. Hackney: I have something compelling to add. I attended the meeting of the Senate Executive Committee at which the sentiments were very different* (* See the SEC Resolution of February 28, Almanac March 4, p. 2.). There was a great deal of concern about the health insurance program-- particularly the large rise in the PENNCare Benefit. I think the reason there's a difference of opinion between the PBC and other people who may not have been as involved in benefits as we were in the past is that the PBC had been aware of the fact that the health care premiums were dropping to zero--and had believed that this was not an appropriate thing to have happen.

I think to people who weren't watching what was going on, it looked like the University was simply giving you a better benefit--when in fact, what was happening was a combination of a coincidence and an accident.

And the reason that it didn't get dealt with earlier was in part because there was no Vice President for Human Resources and in part, because it kept looking as if we were about to have benefits redesign. So I think that perhaps the difference of opinion on that subject is related to being aware of the history.

The discussion of graduate tuition benefits was exactly the same in the two committees. That is, a promise is a promise--if you can't count on it then what happens to undergraduate tuition next time around?

Dr. Anthony Tomazinis: Some of us have read and reread the statement by the Benefits Advisory Committee and we have a number of observations to make. First we do not agree with, or we felt very alarmed by, the language of the report itself and the philosophy behind it.

We were very surprised to find that the definition of "competitiveness" for this University has changed all of a sudden. Once upon a time we thought that competitive meant that we should be in a position that we're going to attract the best professors, the best administrators, and the best students. Now we find that at least within this statement [the "Review and Recommendations"] the definition is that in order to be competitive we must be the cheapest outfit on the block--we shouldn't let anybody else be cheaper than we are....We looked at the history and we haven't found this multi-year deficit threat to the University, or deficit operations today, or reduction of income. We also see a huge stream of expenses from many other sources. So we came back and said, Who is providing this definition of deficit, or competitiveness, in the name of which we are called upon to start examining carefully everything that we are spending?

Then we came to the specifics. We found--I found, my school has found, my colleagues have found--that the graduate tuition is the first measure of concern, of credibility, of reliability. Do we accept the word of our President, of our Dean, of our Provost, as final word upon which we can determine our acts in this world, or is it a statement which is good for today, but tomorrow may change? Most of us determine our lives on what those officials
tell us, and we think that it is a contract of immense significance: the President said it, period, this is it; the Provost said it; the Dean said it, period. When we have negotiations to make with other colleagues, we mention to them "who said so," in detail, word by word, with every comma there, to make sure that we do not misunderstand key issues; we think that we make a contract. It is beyond belief, the shock, that we discover that all of a sudden because five or six people have changed, now the new definition, new duration, new weight is being applied. We believe those are mistakes.

There is a third item. It appears that the only client for this report is the President, who must be convinced that this is the course that she should follow. But it happens that there are many other clients. Presenting to the President how much profit, or how many savings, is half of the calculation. The question is who pays for it, and how much each one of us will be paying for it. There is no indication of how much more it will cost to each of us. For
instance there is a comprehensive health insurance [he discusses increase in PENNCare cost]. If there is any work to be done by that [Benefits Advisory] committee it is to realize that there are several clients, and although the President is a very important client and as of now is uncommitted, there are others who also have choices to make, and it is imperative that that statement becomes clearer....We cannot vote before we see printing that will come two weeks from now.

Dr. Peter Kuriloff: David, I'd like to ask you a couple of questions. Several things came up at SEC around health care. One was that the mental health components are quite inadequate. I've heard from the current president of the APA, the American Psychological Association, who's on our faculty, and from some very distinguished psychiatrists on the faculty and from some counselors on the faculty. All of them feel that with the exception
of the PENNCare and Blue Cross/Blue Shield 100, those benefits are very inadequate. There's also deep concern about the caps; and the third thing is long term care. I wonder if your committee had looked at that and the provisions for that.

Dr. Hackney: The PBC did not discuss any of those issues in this last three weeks since we got the report. I'd agree with you that all three of those are issues. The long term care issue is one the Benefits Committee started to look at somewhat last year. It's a tough problem. These are relatively new contracts and there weren't clear guidelines, to say the least, as to what would constitute a reasonable price or a reasonable set of provisions. I certainly agree that it is something that should stay on the table. I don't recall its coming up during the benefits redesign.

My recollection of the discussions about the health insurance plans was that the provisions of them were going to stay the same both to make them relatively more familiar to employees when things changed and because it was a limit of the number of things that could be dealt with in that period of time. But I think that the existence of those lifetime caps is a big problem; I think you're right. But during this period, you'll find the PBC was in a pure reaction mode trying to analyze the things that had come to it, and didn't have time to go very much farther....

Dr. Kuriloff: It would be a big service if you could pick up on that and the mental health piece in the future.

Dr. Hackney: That relates to a question that the Committee is very concerned about, and that is, "What is the role of the Personnel Benefits Committee?" This year it didn't really have anything to do until the report came out. Many of the things it traditionally would have done, were done by the Benefits Redesign Advisory Committee and since the PBC was out of the loop they couldn't give any comment to what was going. So I got some very dissatisfied comments--from people who'd had their arms twisted to join the Personnel Benefits Committee this year because benefits redesign was coming up--that nothing was going on.

We had two meetings. At one meeting we spent all our time complaining about the fact that we were frozen out of the process. At the other committee meeting we spent a brief amount of time talking about a financial planning issues for employees, but concluded that it wasn't really a cost effective thing to do. But the Personnel Benefits Committee has not really had too much of a function this year, except for these last few weeks.

And I suppose in the future, the question is, "Is there a role for the Personnel Benefits Committee, and if so what will it be?" At the moment, at least in the way this process has gone so far, it really has not had a role. And it believes firmly that it has not had time to analyze these reports that have come out. So there is a great deal of concern that it was not involved while the report was being generated and its ability to give intelligent feedback is limited by the time pressure.

[A speaker asks Dr. Hackney if in connection with graduate tuition benefits there was any discussion about honoring the contracts of those already here.]

Dr. Hackney: The suggestion from the committee was not to change the graduate tuition benefit for anyone who's currently employed or for people who have accepted a job here but haven't started working. The rationale for that was that people had come here under an expectation that that was the benefit and that it should not be changed. The broader issue of whether any of the other benefits should be changed has to do with whether or not they are considered part of an employment contract; [the Committee] did not consider all of them to be employment contracts; some were considered improvements for the employees, specifically the life insurance proposal. The Committee didn't discuss any option to choose old or new on that and I can tell you my opinion on that: It would be hopelessly complicated... and I think almost no one would choose the old plan if they understood the new plan; I'm not sure how many people do.

[A speaker asks about ways to cushion a presumed drop in real income as a result of contribution to health insurance, and also asks if there will be assistance for employees to find out about and deal with HMO limitations?]

Dr. Hackney [After agreeing that real income could come down]: What has happened in the recent past is that employee income went up well above the rate of inflation because of the way premiums for health insurance dropped....

Specifically about PENNCare: It didn't exist until two years ago, and when it came out, the Health System said they wanted to put a very aggressive price on it; and they set at a price that was equal to the comprehensive--a fairly bare-bones but for many people quite acceptable indemnity plan. The PBC worried, at the time, how they could offer that rich a plan at that price, but was willing to go along with it so long as the University was not insuring
that plan. What happened is the Health System was no longer willing to offer that plan at that price this year. So the Benefits Advisory Committee took suggestions as what reasonable price would be, given the richness of the plan, if the University has to take the risk on the plan.

[As to HMOs' limitations, he continued]: HMOs provide explicit caps they tell you about--and we can assume those will be in the Open Enrollment data. But the other problem is that they have proprietary information about what conditions and procedures they consider appropriate, what treatments they will pay for and which they consider excessive, and they generally will not tell anyone about that....

Peter Freyd: I heard in SEC and have my own anecdotal evidence that people have difficulty working with Keystone.... I wandered down to Center City and found the drugstores not willing any more to work with Keystone, because of what they said were ridiculous delays in payment. The large chains seem to have working arrangements with Keystone. This is a minor thing but it's a beautiful illustration of the huge complexity of decisions we're being asked to make within a couple of weeks. There are ramifications of this far beyond what anybody has mentioned....The one I just brought up is the impact of this change on the West Philadelphia community.

Peter Kuriloff: I think if these changes go through as proposed, which means substantially more people might move toward an HMO, it's totally incumbent on the University to act like a 500-lb. gorilla in the dealing with the HMOs that are on our contract, and make sure that they're satisfactory--that the turnaround rate, the answering of phones, the paperwork are not problematic in any way.

[Dr. Gross turns to the two observers who had asked to speak. Note that their remarks are followed by Dr. Barbara Lowery's response, below, to some of the questions raised throughout the meeting.

[Before the prepared statement Mr. Lukasiak commented on PENNCare pricing. He has expanded that into a Speaking Out letter, which is in this issue, with a response from Dr. Lowery and Mr. Davidson.]

Remarks of Paul Lukasiak

The benefits redesign proposal is grossly unfair to Penn's support staff. The Committee has obviously ignored the fourth principal under which it was supposedly operating, that "No single group should bear a disproportionate burden for benefits cost containment."

Let's take, as an example, two single mothers of two--one a file clerk making $20,000 a year, the other an upper-level administrator making $80,000. Both of them are currently enrolled in PENNCare, and are receiving life insurance of four times salary.

To sustain the same level of health coverage, the file clerk will have to contribute 6 and a quarter percent of her gross pay--approximately 8 to 10 percent of her paycheck. Or she can go to a significantly lower level of coverage--and still wind up with a paycheck significantly smaller. Can anyone at this table imagine a benefits proposal that would demand an equivalent choice and sacrifice from the administrators?

[Comments to have been made on differentials in life insurance coverage were deleted by the author with the notation that he agrees with the Personnel Benefits Committee recommendation to substitute life insurance of $50,000 for the proposed 1 x annual salary.--Ed.]

The administrator, who already has a college degree, can take graduate courses at Wharton to improve her job skills for free. The file clerk will have to pay out-of-pocket to increase her job skills, because Penn continues to refuse to make any of its employee tuition benefits transferable.

Let's be honest. Penn has decided to make a significant reduction in the total compensation package it gives its employees order to money.

For the last several years, when we asked about the low salary increases, we were told to look at how Penn was holding the line on health care costs. So we did and on balance we were satisfied. Now we are being told "Oops! We made a mistake! We never meant to pay this much." The bottom line here is that Penn is cutting out take-home pay, and support staff is being hit with the biggest cuts.

There is no way that a committee composed almost entirely of upper-level administrators and medical doctors would ever come up with a proposal that required themselves to make the kinds of choices and sacrifices being asked by those of us on the low end of the salary scale. If this proposal goes through as planned, those who make the decision will need to see a doctor; because either the part of their brain that controls conscience has ceased to function, or they will need the strongest sedatives available if they expect to get any sleep.

One final thought: Penn's support staff is very aware that the reason we are being singled out is that, unlike the faculty, we have nothing like the AAUP to support us. We trust this University to treat us fairly. This proposal is a violation of that trust, and is sending a very strong signal to us--that the only way to receive fair treatment will be to organize ourselves to bargain collectively. Before Penn decides to impose this plan on us, it had better
think long and hard about the long-term implications.

Statement of John Hogan

My name is John Hogan. For eight and a half years, I've worked in the Penn libraries, currently at the Biddle Law Library. Thus I've been a member of AFSCME Local 590, which represents the Library support staff Currently 1 serve as local treasurer and as a member of the local's negotiating team. We will be discussing the University's proposed benefit redesign in our contract negotiations later this year. But I thought it might be useful for an A3
employee with an unusual amount of the security to offer some general comments on his own behalf.

I've heard a great deal of surprise and dismay from my fellow A3s, organized and unorganized, at the breadth and abruptness of these proposals. Coming on the heels of numerous layoffs and of the sudden outsourcing of one major business service and the prospective outsourcing of several more, these proposals can only increase the fear and demoralization of the University's employees. It seems the University is following the example of the City of Philadelphia in their 1992 contract negotiations, when they tried to balance their budget on the backs of city employees through benefit cuts and privatization, only without the fiscal crisis that appeared to justify the City's harsh and precipitate action.

The University is also following the City's example in a more sinister way. For years the University, like the City, justified the lower than market salaries they paid their staff by pointing to the generosity of the benefits package. The redesign committee, like the City, has isolated the benefits package from this context, noted its generosity and proposes to reduce it to market standards with no compensating increase in salaries.

And as I sat in the meeting to explain the proposals to the Law School staff an impression began to form that became clear only later. Employees with twenty or twenty-five or more years of hard, dedicated, extremely effective service to the University are being told that the understandings under which they came to work here, on the basis of which they have planned their futures and the education of their children, are vapor, and that they were naive to believe that those understandings actually represented commitments by the University. Not only that--they are being given this message by people who have been at the University for three years or less, who don't know the staff or their work. The Law School meeting was conducted by someone who worked for City Council during the 1992 negotiations and has been at Penn for about a year. I find that harsh. I also find it insulting and alarming.

Penn's employees deserve better. If the University is in trouble, it is not because her support staff put her there. Any proposal to fix the University at the staffs expense is unfair; and should be unacceptable to the University community. I hope the University community agrees.

I'd like to answer just a few of the questions that have been asked. One is about the process. In putting together the committee for benefits redesign the administration asked the Faculty Senate's input on that committee. Everyone agreed that the chair of the Personnel Benefits committee should be on it because we do appreciate the advice of the PBC; and also, David was a superb person for the Committee, as you can probably tell. He knows quite
a bit about benefits and we appreciated his input.

Issues like long term care and mental health [were brought up but with so much work to do the Committee decided they] would have to be put aside until next year; hopefully the Personnel Benefits Committee would want to do those things. It is not that we are not interested in them; we just did not have the time to do that--it is a complex job.

In terms of Keystone, questions have sort of come out of the blue very recently. We visited all the schools except two and never heard anything about Keystone until yesterday and the day before when we visited Nursing and Medicine and heard issues about Keystone. We will look into those issues and find out what the problem is.

With respect to the lower paid employees: David, I hope you will confirm that the Benefits Advisory Committee worked very hard to make sure our lower paid employees were not taking the brunt of the health care burden. Sixty percent of our lower paid employees are in the HMOs and if you notice, those HMOs are priced very low in comparison to other programs. In addition to pricing those about as low as one can (it's high from zero but
it is relatively low) the Committee decided to add a prescription plan to those two plans where it had not been before--at some cost, but actually the average prescription user will be better off than in the past because the prescriptions are worth a lot of money. A number of our higher paid employees, most of our highly paid employees, tend to be in the indemnity plan in Blue Cross/Blue Shield. Their cost sharing is 37 percent. The cost sharing that we put in for the lower paid employees is 6 percent. The University picks up the rest. So you see both ends of the spectrum there; and I think the committee worked very hard to be fair to the lower paid employees.

As you know Michael Wachter and I have visited all of the faculties on campus, with New Bolton Center yet to do tomorrow. I've been very happy with the kinds of feedback we are getting. People are being honest with us, they are saying here are the problems, here are the things you have to fix; and we have been open to listening to that.

I'm pleased that the Personnel Benefits Committee have given us some feedback. It may not be what we started out to do, but we are listening to the feedback and I suspect--I hope--that SEC will do the same. I think it is important for us to get your feedback.

We have worked with the SEC committee for four weeks now, I think, not three. In any event, we have worked with the SEC committee and we would like to see your further input as we proceed to the decisions.